wy aa Mire, AA y | ee i es . /, “ = . ’ * a ~ p a | S aS a a5, > Me tte A ‘ q ; Sat , Sees “Fy * ‘ DD - < d ’ t rue 4 ee tte 2. eee \e r » Pie + 4 e CT ibang SMITHSONIAN YEAR ° 1982 Statement by the Secretary "BY THE SECRETARY SMITHSONIAN YEAR + 1982 Know Thy Neighbor as Thyself STATEMENT BY THE SECRETARY S. DILLON RIPLEY The Smithsonian Institution 1983 4 U Poe ee - = -™ ay ~ Pet. j rae: OS ae ot es ad Ms ig ~~ ae ~S REN ee FRONTISPIECE: With the completion of the Smithsonian’s Quadrangle project serving our public and Associates alike, a new dimension in America’s com- prehension of the non-Western world will be opened on the Mall. Exhibitions, performances, seminars, and discussions will enhance America’s understand- ing of this panorama of nations harboring two-thirds of the planet’s popula- tion. Shown are (left to right) a Korean musician, students in a seminar, a Kutiyattam performer from Kerala, India, young visitors being introduced to African life and art, and Smithsonian Associates visiting the Treasury Build- ing in Petra, Jordan. The Smithsonian Institution The Smithsonian Institution was created by act of Congress in 1846 in accordance with the terms of the will of James Smithson of England, who in 1826 bequeathed his property to the United States of America “to found at Washington, under the name of the Smithsonian Institution, an establishment for the increase and diffusion of knowledge among men.” After receiving the property and accepting the trust, Congress incorporated the Institution in an “establishment,” whose statutory members are the President, the Vice President, the Chief Justice, and the heads of the executive departments, and vested responsibility for administering the trust in the Smithsonian Board of Regents. THE ESTABLISHMENT Ronald Reagan, President of the United States George H. W. Bush, Vice President of the United States Warren E. Burger, Chief Justice of the United States George P. Shultz, Secretary of State Donald Regan, Secretary of the Treasury Caspar W. Weinberger, Secretary of Defense William French Smith, Attorney General James G. Watt, Secretary of the Interior John R. Block, Secretary of Agriculture Malcolm Baldrige, Secretary of Commerce Raymond J. Donovan, Secretary of Labor Richard S. Schweiker, Secretary of Health and Human Services Terrell H. Bell, Secretary of Education Samuel R. Pierce, Jr., Secretary of Housing and Urban Development Andrew L. Lewis, Jr., Secretary of Transportation James B. Edwards, Secretary of Energy [v] Board of Regents and Secretary » September 30, 1982 REGENTS OF THE Warren E. Burger, Chief Justice of the United States, ex officio, Chancellor INSTITUTION EXECUTIVE COMMITTEE THE SECRETARY George H. W. Bush, Vice President of the United States, ex officio Henry M. Jackson, senator from Washington Barry Goldwater, senator from Arizona Edwin Jacob (Jake) Garn, senator from Utah Silvio O. Conte, representative from Massachusetts Norman Y. Mineta, representative from California Edward P. Boland, representative from Massachusetts David C. Acheson, citizen of the District of Columbia Anne L. Armstrong, citizen of Texas J. Paul Austin, citizen of Georgia William G. Bowen, citizen of New Jersey William A. M. Burden, citizen of New York Murray Gell-Mann, citizen of California Nancy Hanks, citizen of the District of Columbia A. Leon Higginbotham, Jr., citizen of Pennsylvania Carlisle H. Humelsine, citizen of Virginia Warren E. Burger, Chancellor David C. Acheson William A. M. Burden Carlisle H. Humelsine (Chairman) S. Dillon Ripley Phillip S. Hughes, Under Secretary Charles Blitzer, Assistant Secretary for History and Art David Challinor, Assistant Secretary for Science Joseph Coudon, Special Assistant to the Secretary Julian T. Euell, Assistant Secretary for Public Service James M. Hobbins, Executive Assistant to the Secretary Christian C. Hohenlohe, Treasurer John F. Jameson, Assistant Secretary for Administration Paul N. Perrot, Assistant Secretary for Museum Programs Peter G. Powers, General Counsel James McK. Symington, Director, Office of Membership and Development Lawrence E. Taylor, Coordinator of Public Information [vi] Smithsonian Year + 1982 STATEMENT BY THE SECRETARY c This cut-away drawing of the Quadrangle (Independence Avenue view), from the architectural firm of Shepley, Bulfinch, Richardson and Abbott, shows some of the space to be provided in three levels for exhibitions, theater pro- ductions, and study. eC ee = eTite Know Thy Neighbor as Thyself S. DILLON RIPLEY THIS PARAPHRASE OF THE BIBLE saying, “Love Thy Neighbor as Thy- self,” a true saying, and one to be emulated if in larger affairs it had not a mocking ring, is one that I often think of in connection with the Smithsonian. To know is to learn but also to give a little. If one knows anything it is a scrap of learning. Every scrap should be shared for all bear upon a central theme. The assemblage of knowledge is like a pyramid. Its creation is the very abnegation of self, and in the process we learn to know each other, more sanely, I believe, than love would ever let us do, clouded with the mists of sentiment or tears, as that may be. Speaking at the dedication of the American Museum of Natural History in New York in 1874, Professor Joseph Henry, first Secre- tary of the Smithsonian, stated that James Smithson’s memorial, “pace = eg atc 7 a a re [3] the Institution, should be a work place, a “college of discoverers,” a haven for research, “discovering new facts, new phenomena and new principles,” and making this information known to all. Knowl- edge should be spread abroad by museums based on this research. This is the finest memorial of all, for “what, in comparison to this, are local monuments, pyramids of flint, statues of brass or obelisks of marble!” These two generations past have been the generations of self, on which mountains of egocentrism have been erected, eroding over the years, as always, in the sands of anomie and the washings of self-pity. I went to Persepolis not long ago and walked over the desert into the blue silk and damask tents erected to celebrate two thousand five hundred years of a dynasty that never was. Created with cunning skill by French decorators for the nonevent, the tents still stood, the curtains giving way at one’s entrance to the great banquet pavillion; within, a crescent-shaped dias with a crescent table, backed by a row of pale blue velvet tall chairs arranged on one side only, not for conversation but for the admiration of the courtiers and press. No sound broke the spell except for a faint soughing of the wind, which made the gilt candelabra sway slightly in a ghostly reverie. Oh, Ozymandias have you told us nothing? The accumulation of knowledge must not be a selfish thing, for knowledge and learning go hand in hand, and to learn is to teach. James Smithson in his charge to his heirs—his administrators for the future—said that his Institution should serve for “the increase and diffusion of knowledge among men” (i.e., mankind). One of my colleagues, Wilcomb Washburn, has recently discovered a letter of Smithson’s in French, addressed to Baron Georges Cuvier, the most celebrated French savant of his day, written from Germany in 1806, twenty years before Smithson’s death, in which he pres- aged the language of his famous will. A translation might be, “It seems to me, Sir, that the man of genius who through important discoveries expands the scope of the human mind is entitled to something beyond a mere and fruitless admiration [for this we might read “ego trip”]. That he is entitled to expect that all con- tribute as much as they can to facilitate research so that, if fame is achieved, they can share in the benefits. And it would indeed be unjust that national differences as well as resentment and war should have any bearing in this matter. The works of scientists [4] being for all nations, they themselves should be looked upon as citizens of mankind.” It seems to me that what Smithson is writing is that as scientists or scholars of history or art at the Smithsonian, we are obligated to increase and diffuse knowledge, and in the process sweep away the cobwebs of self-pity, deriving satisfaction not from self- promotion but rather from the rewarding tasks of increasing and diffusing knowledge. We must reach what we know and discover, as best we can, using research as a tool for illumination. The Smithsonian Institution is embarking on a course which, if successful, will lead to an expansion on an international scale of our motto. For perhaps the first time in our history, we are em- barking in a spirit of social responsibility on a creative effort to increase understanding and respect for our neighbors. One of our mandates, the diffusion of knowledge among men (among mankind) works both ways, within and without. We can, for example, tell Americans about their history, but how can we extend that to tell Americans about the history of the rest of the world, especially about those parts and nations of which we are still so woefully ignorant. Our entire awareness of others has been concentrated until recently on the so-called Western world: Europe —extending east to Russia, south to the Mediterranean—and parts of Latin American, our traditional neighbors. Until World War II, Asia was known to relatively few Americans. Few Americans pene- trated beyond Japan and China. The vast worlds of more southern Asia (except for the Philippines), tropical Asia, the southwest Pacific areas (except for Australia), and Africa and the Middle East were essentially little-known and beyond most people’s means to visit or experience. Now this Institution has an opportunity to combine objects, col- lections such as those in the Freer Gallery of Art, the National Museum of African Art, collections in our kindred departments of Anthropology and History and Art, into our Quadrangle, a new Center for African, Near Eastern, and Asian Cultures, to be built south of the original Smithsonian Castle. This Center will delineate to Americans as well as to the world the necessity to “know your neighbor,’ to respect our fellow inhabitants in this shrinking world, and in the process generate an increased measure of self-respect in ourselves and in our neighbors as well. Traditions and cultures [s] alien to the massive onslaughts of mechanistic technology are frag- ile indeed. They are being eroded every day just as the forests of the tropics disappear. Cultures drift away like the dust that follows the draft of a lifting jet plane on a far-away runway. Cultures and traditions represent the only stability, the only defense against the mindlessness of self, and the only model for the cultivation of self- respect. In the world of this vast region, home to almost two-thirds of the human population, there are now ninety-two nations, where perhaps a dozen reigned before World War IJ. We in America, still unused to the totality of this change, remember only dimly some of the new names and find little occasion to think of the im- plications involved, except perhaps to be bothered by reading of the debates in the General Assembly of the United Nations, or to hear of some man-made or natural catastrophe on the other side of the globe. Our Center will help to correct this lack of understand- ing on our side as well as theirs. We will have a chance to fore- gather here to discourse, to exhibit their traditions and cultures in a meaningful way, and to demonstrate the long history of inven- tion, intellectual achievement, and civilization, of which those of us on both sides must remind ourselves before it is too late. So we This elevation drawing by Shepley, Bulfinch, Richardson and Abbott, archi- tects, shows the Quadrangle’s pavilions and landscaping, north side. [6] have embarked upon the creation of this Center in an effort to “put out more flags,” to shine the light of understanding between us. In this effort, approved by the Regents of the Institution, we are pledged to raise $75 million for construction, half by the Smith- sonian itself and its dedicated friends, and half by the federal gov- ernment. Over the past few years many others have shared this vision and have helped us bring it closer to fruition. To signify the government’s commitment to the project, the United States Con- gress in its 1983 budget has approved legislation authorizing con- struction of the Quadrangle and has appropriated the federal share of the financing in the amount of $36.5 million to add to almost $1 million appropriated the year before. The Smithsonian’s private financing has received a munificent boost in the generosity of Dr. Arthur M. Sackler, a psychiatrist and medical publisher who resides in New York City. He has pledged not only 1,000 works of Asian art, valued well in excess of $50 million, but also $4 million towards construction of the Far Eastern gallery within the Quadrangle, which will house his collec- tion as well as those of others and be named in his honor. In mak- ing these gifts, Dr. Sackler reflected the synthesis as well as the essence of the Quadrangle in saying that’. . . in the years to come, [7] Washington will continue to grow into a world cultural capital, augmenting its status as a world political center.” Support for our Center for African, Near Eastern, and Asian Cultures continues to come in from abroad as well as from other friends of the Institution in many parts of the country. We will celebrate and commemorate their gifts in appropriate ways within the new structure and in the various programs that will flow from it; especially in outreach and public education. Throughout the past year the existing programs of the Institu- tion, as well as the supporting functions that are crucial to their success in reaching the broad audiences that we serve, have been marked by a continuing high level of public interest and achieve- ment. Steady progress has been made towards completing in 1983 the initial physical inventory of the National Collections entrusted to our care. Not only will we then be able to refine more intelli- gently our previous estimates of holding some 75 million items, but we will also have more substantial information about the location and condition of all these objects, thus enabling us to manage and conserve them for generations yet to come. Another significant element in the care and conservation of col- lections is the Museum Support Center, the facility in nearby Suit- land, Maryland, currently under construction. We expect to take possession of the building within budget and on schedule in this winter of 1983. To the partnership, Metcalf/KCF and to the chief architect of the project, Coke Florance, we offer our appreciation for so thoughtfully resolving the problems of space for collections storage and research, along with conservation training, in a massive edifice that, nonetheless, provides a comfortable working environ- ment in harmony with its natural surroundings. In the area of collections acquisition, gifts and purchases have enabled us to extend modestly the evidence of our cultural heritage and of the physical world inhabited by us and by those who have gone before us. The National Museum of African Art has acquired two early and important Benin bronzes, while the National Portrait Gallery, in association with the Thomas Jefferson Memorial Foun- dation at Charlottesville, Virginia, has purchased Gilbert Stuart’s “Edgehill” portrait of Thomas Jefferson painted in 1805. Following the pattern established in the joint purchase of the Stuart portraits of George and Martha Washington, the portrait, named for the [8] Smithsonian Associates search for wildlife at Corbett National Park, India. plantation of Jefferson’s grandson where it hung for many years, will be exhibited for alternating three-year periods at the Portrait Gallery and at Monticello. The lives of two other presidents were the focus of major win- ter exhibitions and related activities. To commemorate the one- hundredth anniversary of the birth of Franklin Roosevelt on Janu- ary 30, 1882, a number of events took place in several Smithsonian museums. Early January saw the opening of the exhibition Roose- velt’s America: New Deal Art from the National Museum of Amer- ican Art. Shortly thereafter a small exhibition, FDR: The Early Years, chronicling his early life and entrance into the political arena, opened at the National Portrait Gallery. Our friend, the dis- tinguished journalist Joseph Alsop, a cousin of the late president, presented a lecture, “FDR: The Great Change,” in conjunction with the exhibition. At the end of January the National Museum of American History presented Franklin Delano Roosevelt: The Inti- mate Presidency, which included the White House desk and micro- phones from which he delivered his famous “fireside chats,” his 1938 Ford with special hand controls, and a wide range of photo- graphs of FDR and of the nation during his presidency, giving an especial quality of verisimilitude to the event. On February 22 a gala birthday party at the National Museum of American History, followed by fireworks on the Mall, marked the two-hundredth-fiftieth anniversary of Washington’s birth and the opening of a major exhibition, George Washington: A Figure Upon the Stage. The exhibit surveys the many ways in which Americans of the eighteenth and nineteenth centuries have idolized and indeed utilized Washington and the aura of his name. Also, perhaps this exhibition helps to humanize “G.W.”, showing sides of his character and his ambitions, usually clouded in the atmo- sphere of the almost imperial tradition. Smithsonian historian Margaret Klapthor, curator of the exhibition, points out that “the image and character of Washington have taken various forms,” with each era favoring an appearance related to its own values. The National Portrait Gallery mounted a related exhibition of prints depicting George Washington and showing the variety of ways in which the Founding Father was perceived by his contemporaries. Irish songs and fancy footwork marked the March 17 opening of Celebration: A World of Art and Ritual, which examines the [10] Gilbert Stuart’s “Edgehill” portrait of Thomas Jefferson, painted in 1805, is now jointly owned by the National Portrait Gallery and the Thomas Jefferson Memo- rial Foundation, Incorporated, Charlottesville, Virginia. The painting will be exhibited for alternating three-year periods at the nrc and at Monticello. Richard Fiske (left), NMNH director, participates in an Eskimo dance at a Contribut- ing Membership reception following a review of the major exhibition inua: spirit world of the bering sea eskimo. Below. Paul E. Garber, NAsmM historian emeritus, shows seventh and eighth graders how to build a kite from scratch as part of the “D.C. Day” festivities held at the museum. universal phenomenon of celebration and demostrates how differ- ent people mark the important events and cycles in their societies. The exhibition includes approximately 600 objects—95 percent of which have never before been exhibited—from more than 60 cul- tures and the collections of 9 Smithsonian museums. A related exhibition was presented later in the year at the National Museum of African Art: Life . . . Afterlife: African Funerary Sculpture, which examines the cycle of birth, death, rebirth, and afterlife experienced by many African cultures. Other notable exhibitions included two companion shows at the Hirshhorn Museum and Sculpture Garden—Raphael Soyer: 65 Years of Printmaking and Soyer Since 1960—honoring the very substantial output of this talented artist and contributor to the museum’s collections. The Hirshhorn was also host to the De Stijl: 1917-1931, Visions of Utopia exhibition, illuminating the art, architecture, and design of the influential Dutch movement that was characterized by elemen- tary, geometric forms and pure, primary colors. The exhibition was one of several international events marking the two-hundredth anniversary of the establishment of formal diplomatic relations between the United States and The Netherlands, the longest peace- ful relationship the United States has had with any foreign power. Further reflecting significant international influences in art and design, the Cooper-Hewitt Museum opened in September a retro- spective view of the history of Scandinavian design during the last 100 years, which included furniture, glass, ceramics, metal work, and textiles as part of a national celebration of “Scandinavia Today.” | A selection from the Meserve Collection of the original glass plate negatives of Mathew Brady’s portrait photographs were ex- hibited for the first time in May at the National Portrait Gallery in a specially designed room, evocative of the mid-nineteenth century. This unique collection of immense historical importance also in- cludes the only print ever made from the last photograph of Presi- dent Lincoln. Perhaps the most haunting likeness of Lincoln, it was taken on April 10, 1865, in a studio four blocks south of the Portrait Gallery building just four days before his assassination. During the past year our colleagues in the physical and natural sciences also have made lively and important contributions in exhibitions as well as in research. Of the former, perhaps the most [13] extraordinary was inua: spirit world of the bering sea eskimo, which opened in June in the Evans Gallery of the National Museum of Natural History. Featuring for the first time nearly 500 objects collected for the Smithsonian more than 100 years ago by the naturalist and surveyor Edward Nelson, the exhibition recreates the world of the Bering Sea Eskimo and traces the roots of Eskimo cultural and artistic traditions. Many objects in the exhibition were associated with elaborate myths and decorated with dual animal and human images, reflecting the belief of the Eskimos that every- thing had an inua, a human-like essence or spirit that was revealed to people in dreams, visions, or when encountering animals. Also at the National Museum of Natural History, the ever-popular Dino- saur Hall was reopened after a hiatus of several years during which it has been renovated and the paleontological exhibits enlarged and current theories of evolution presented. Dr. Terry Erwin, a curator in the museum’s Department of Ento- mology, continued his studies of the tropical rain forest canopy and of the insect life abiding there. This research reveals that the num- ber of insect species worldwide may be substantially larger than previously suspected, and that tropical deforestation, therefore, will inevitably destroy far larger numbers of species than had been anticipated or supposed. The world’s tropical rain forests are home to half of the earth’s plant and animal species, and thus are areas of immense priority to numbers of Smithsonian scientists. During a symposium on the ecology and management of the tropical rain forest, which was held at the University of Leeds in England last spring, Dr. Ira Rubinoff, director of our Tropical Research Institute in Panama, proposed the establishment of a system of Tropical Moist Forest Reserves in the temperate zones, financed by the developed nations in order to save this crucial international resource. Dr. David Roubik, an entomologist at the Institute and an expert on the African honeybee let loose on an unsuspecting New World in Brazil in 1957, has been working closely with Panamanian au- thorities on ways of adapting to these notoriously aggressive bees, which arrived in the Republic from the south late last winter. He is sharing his information with Central American governments as well, for this is a matter of concern as the species spreads north- wards. [14] Another study on the effects of forest habitat destruction was conducted by Dr. James Lynch of the Chesapeake Bay Center for Environmental Studies, whose work was an investigation of the size and stability of bird populations in Maryland. Dr. Lynch has begun work with other Smithsonian scientists on a similar study in the Yucatan Peninsula in Mexico, part of the winter migration route for a fifth of our North American bird species. _At the National Zoological Park’s Conservation and Research Center in Front Royal, Virginia, studies on the behavioral ecology and population dynamics of wildlife from around the world are underway. This work is being used as a means of training scientists from India and Europe in the use of sophisticated techniques for studying endangered animals in their own countries and elsewhere in the world. The reptile and amphibian house of the Zoo’s Rock Creek loca- tion has been renovated and reopened to the public. The refur- bished structure proves to be much more effective than the former house for studying these exotic animals and encouraging breeding and survival rates in captivity. For the second consecutive year the Zoo received the highest award from the American Association of Zoological Parks and Aquariums for captive propagation programs. The National Air and Space Museum commemorated twenty-five years of space exploration with an exhibition and a conference of that name, both of which seek to place accomplishments of the space age in a social, cultural, and political context. The Museum’s Garber Facility, for the restoration and preservation of aircraft, celebrated its fifth anniversary with a week-long series of events for the general public. The observatory atop Mount Hopkins in Arizona was renamed for our colleague Fred Lawrence Whipple, and dedicated in his honor last May. Fred Whipple was the first director of the Smith- sonian Astrophysical Observatory when it moved to Cambridge, and was a primary developer of the concept of the MMT. The newly renovated gamma ray reflector—the largest in the world— has resumed operation at the Whipple Observatory and will enable astronomers to probe high energy events in the far reaches of the universe. In an effort to understand other aspects of universality and fundamental processes, the Smithsonian sponsored an international [15] symposium on “How Humans Adapt: A Biocultural Odyssey.” A diverse group of scholars met to debate what may be one of the most critical questions of our time: has Homo sapiens, having come this far in his several million years, learned anything at all that can help him survive in the present global village and adapt to the future? The papers from the symposium—the keynote speaker of which was the late René Dubos—will be published by the Smith- sonian Institution Press in the winter of 1983. During the summer, the Festival of American Folklife returned to its original plot on the National Mall among the Smithsonian’s museum buildings. The larger and more accessible site accents the strong, complementary relationships between museum collections and the presenters of living traditions. This sixteenth annual festi- val featured the rich and diverse folk traditions of Korea during the anniversary of a century of diplomatic relations between our two countries, as well as the Diamond Jubilee of the State of Okla- homa. It reflected the traditions that Oklahomans nourish and support, particularly those associated with two major activities— horses and oil—and brought a functioning rig and a quarter-mile race track to the Mall. The festival was also the setting for the awards ceremony for the first annual National Heritage Fellow- ships, honors given by the National Endowment for the Arts to traditional musicians and craftsmen who have made outstanding contributions to the cultural life of the nation. As in previous years, we should not let this report slip by with- out mentioning certain comings and goings of Smithsonian staff. We were terribly saddened this year by the death of John Estes, the experienced director of the International Exchange Service. By the end of the fiscal year we learned that another dear friend and companion, our Assistant Secretary for Public Service, Julian T. Euell, who had served in that capacity for nearly a decade, would be accepting the directorship of the Oakland Museum. Still other departures included Noel Hinners, the director of the National Air and Space Museum, who became director of the Goddard Space Center; Robert Angle, director of our National Associates program, who assumed membership responsibilities for the National Trust for Historic Preservation; and both David Estabrook, director of Elementary and Secondary Education, and Richard Griesel, our [16] e0GR RETAILS oe? * Y . . ee coutecee > eumanummad ae) wR ey APRA ae Her “a ee TARY NNR AE AT Ce ea Se ae | ae! Quarter horses from Oklahoma race down the National Mall at the Sixteenth Annual Festival of American Folklife held in the summer 1982. business manager, who have left for the vineyards of private indus- try. We have been fortunate to be able to promote Jacqueline Austin to the helm of the National Associates, Ann Bay to the head of Elementary and Secondary Education, and Joe Chmelik to business manager. At the same time we should note two nearly simultaneous arrivals at the old Patent Office Building. Alan Fern, formerly of the Library of Congress, has been named director of the National Portrait Gallery, and Charles Eldredge, the former director of the Spencer Museum of Art in Lawrence, Kansas, has assumed the directorship of the National Museum of American Art. I am confi- dent these two innovative and sensitive scholars will lead their programs in imaginative ways and in the spirit of partnership. If the pursuit of knowledge is the aim of this Institution, then we can look forward to an enlarging era in the programs planned for the future of our new Center described in the opening of this statement. Americans long to be friends with all the world. We are frustrated by those who fail to understand that we hope that our civilization, our history of democracy and freedom is a real one, in spite of the ups and downs of our progress. If James Smithson had a vision—that somewhere across the ocean from the Europe of stratified hierarchies and iron-bound convention of the eighteenth century, this new world could achieve such an ideal—we could hardly deny that that vision was proleptic. It is in the fulfillment of that ambition of our precursor that we must proceed. There is a time in the world for the realization of these ambi- tions. The eagle on the Great Seal may have arrows or thunder- bolts clutched in one set of claws, but there is an olive branch in the other. Justice and equality demand that America be strong and competent in the role of peace-keeper, but peace itself demands understanding, friendship, and mutual self-respect, hand in hand with certainty. Respect above all for cultures and traditions across the face of that great arc of the world stretching from Atlantic to Pacific, from Africa to East Asia, should insure that we can “know our neighbors as ourselves,” and in this knowing, learn to respect and live with new friends for the future. For indeed there is no other choice. [18] The Board of Regents Tue Boarp oF Recents held three formal meetings during the last year. Additional meetings of the Regents’ Executive Committee, the Audit and Review Committee, the Personnel Committee, and the Investment Policy Committee were held throughout the year and reported at the Regents’ meetings. The first meeting of the Board of Regents was held on Janu- ary 25, 1982, in the Regents’ Room of the Smithsonian Castle and was called to order by the Chancellor. The Executive Committee reported that it met on January 5, 1982, to discuss the Regents’ agenda and took special note of the Audit and Review Committee’s close attention to Smithsonian business, the Secretary’s and staff’s strengthened measures regarding museum protection, and plans to cope with ever-tightening budget stringencies. The Audit and Re- view Committee reported on two of its meetings, one held jointly with the Personnel Committee on October 14, 1981, and the other held on December 2, 1981. The committee proposed a resolution to indemnify Smithsonian Regents, officers, and employees for liabili- ties and expenses incurred as a result of litigation arising from service for the Institution, and the resolution was incorporated by reference into a new Bylaw of the Board of Regents, Section 2.09, entitled INDEMNIFICATION. The Audit and Review Committee also reviewed possible insurance to cover the indemnification and, accordingly, the Regents directed the Treasurer to secure appro- priate “Directors and Officers” insurance. The Audit and Review Committee decided that the thorough auditing conducted annually on the Smithsonian’s trust funds should be extended to an annual audit of the federally appropriated funds by the Institution’s independent auditors, Coopers and Lybrand. In view of the fundamental importance of this matter the Regents expressly endorsed the committee’s action. Other commit- tee reviews included: Coopers and Lybrand’s audit of fiscal year 1981 trust funds; Smithsonian procedures for reporting financial interests; draft [19] standards of conduct; museum security; Smithsonian procedures for construction and repair services; and computer services. The Personnel Committee of the Regents reported that it had reviewed the financial-interests statements of the Secretary’s top assistants and that it found no conflict of interest whatsoever. The Treasurer informed the Regents that a self-assessment review has recently been conducted at the Institution to identify lower priority programs that might be reduced or eliminated, and alternative modes of operation that might create savings of dollars or workyears. After extensive discussion, the Regents agreed that in view of the existing security and financial constraints the Insti- tution should eliminate summer evening hours on a trial basis, subject, if necessary, to further review by the Audit and Review Committee. It was noted that final congressional action resulted in fiscal year 1982 federal appropriations totaling $142,534,000, some 9 percent below the amount requested. That appropriation included $960,000 for Quadrangle planning—the first federal appropriation for this project. The Treasurer also reported that the Office of Management and Budget (oms) allowance for all appropriations for fiscal year 1983 was $192,610,000, reflecting increases for Museum Support Center equipment, critical security and maintenance, and inflation in pay, utilities, and rent. In addition, oms allowed the Institution’s full request ($36.5 million) for Quadrangle construction, but did not allow the Institution’s request for an additional 99 positions to open and operate the Museum Support Center and 48 other posi- tions to strengthen security. The Investment Policy Committee reported that they met on November 17, 1981, to review the performance of the Institution’s three investment managers and to discuss strategies for the future. It was noted that the managers continue to out-perform market averages and that the annualized return from each of the managers for the last three and one-half years was about 16 percent per year. The Secretary outlined the Five-Year Prospectus, FY 1983-1987 and stressed his commitment to include projections beyond the five-year period where appropriate. Priorities of the Institution were the equipment for the Museum Support Center, the comple- tion of the Quadrangle, the enhancement of collections manage- ment activities, security, and automation. The Regents approved [20] the Prospectus as submitted, in anticipation that annual revisions will similarly be presented for approval. The Secretary briefed the Regents on the status of the Quadran- gle project, introducing Mr. George Brakeley of Brakeley, John Price Jones, Inc., the fund-raising consultants. The total income from unrestricted trust funds, gifts, pledges, and interest amounted to $14,017,600 as of November 30, 1981. The Regents discussed the strategies for raising the balance of the $37,500,000 from domestic and foreign foundations, corporations, individuals, and foreign governments. During the fall the Quadrangle design was approved by both the National Capital Planning Commission and the Commission on Fine Arts. The Museum Support Center was reported to be 45 percent complete and about two months ahead of the January 1983 com- pletion date. In a report on the status of the collections inventory, it was noted that the target date for completion of the baseline inventories remains June 1983, after which the inventories will be a continuing process and priority. The Secretary presented a report on the equal opportunity pro- gram, noting only marginal improvement in increasing the repre- sentation of women and minorities, particularly in the higher grades. Recognizing that commendable efforts have already been made and without being critical, the Regents urged the administra- tion to redouble its efforts and explore all possible strategies. Subsequent to the meeting the Audit and Review Committee agreed to review the subject in the spring. In other actions, the Board of Regents effected an amendment to the bylaws of the National Portrait Gallery Commission, reap- pointed Mrs. Elizabeth Brooke Blake, Mr. David Lloyd Kreeger, and Mrs. Margaret McKee to the National Museum of American Art Commission, and paid tribute to the late Dr. Robert Elliot Silber- glied, an entomologist at the Smithsonian Tropical Research Insti- tute, who died in a plane crash on January 13, 1982. The Chancellor announced that Mr. Webb had resigned as chair- man of the Executive Committee. Accepting that resignation with great reluctance, the Chancellor assured the Regents that Mr. Webb would remain on the Executive Committee for the duration of his term. With the consent of the Regents, the Chancellor appointed Mr. Humelsine as chairman, effective January 25, 1982. [21] The traditional Regents’ Dinner was held on Sunday evening, January 24, 1982, in the Thomas M. Evans Gallery of the National Museum of Natural History/Museum of Man, where the exhibi- tion Deep Ocean Photography provided a dramatic setting. The Secretary addressed the guests about his and Mrs. Ripley’s faun- istic and floristic survey of the Namdapha Region in Arunachal Pradesh, India. The spring meeting of the Board of Regents was called to order by the Chancellor on May 3, 1982, in the Regents’ Room. The Executive Committee reported that it met on April 14 to consider the proposed agenda for the Regents’ meeting. The committee noted that the decision to restrict summer evening hours was wide- ly announced and received little criticism. At the suggestion of the committee, the Regents voted to confer on James E. Webb the title of Regent Emeritus upon the expiration of his term on June 21 and to elect David C. Acheson to membership on the committee effec- tive June 22, 1982. After considering a large number of suggested nominees, and the recommendation of the Executive Committee, the Regents voted to request that the Congressional Regents intro- duce and support legislation to appoint Nancy Hanks as a citizen Regent of the Smithsonian, for the statutory term of six years. It was noted that, in response to a poll conducted through the mails in April, the Regents voted to establish the James E. Webb Fellowships for the promotion of excellence in the management of cultural and scientific not-for-profit institutions. The Regents ob- served that this was a particularly appropriate honor for Mr. Webb and that this program in public administration will be of great benefit to the Institution. The Audit and Review Committee reported that they met on March 23, 1982. At that meeting the independent auditors, Coopers and Lybrand, highlighted their December 31, 1981, Report to Man- agement and introduced their consolidated audit plan for fiscal year 1982. Mr. Acheson reported that on March 13 the committee visited the Cooper-Hewitt Museum in New York City. Mr. Hughes had informed the Committee about a current, as yet incomplete, internal audit of the gem collection in the National Museum of Natural History/ Museum of Man. The Audit and Review Committee noted that the indemnifica- tion resolution and bylaw adopted by the Regents on January 25, [22] 1982, had, through inadvertence, not included coverage for Regents Emeritus and members of Regents’ committees and advisory bod- ies. To effect this coverage—and to clarify the intent of the resolu- tion that Smithsonian employees and officers will be indemnified for liabilitity arising out of service on boards of other organiza- tions when that service is part of official Smithsonian duties—the Regents voted to amend the resolution and bylaws, Section 2.09. The Treasurer informed the Regents that the Institution was allowed to submit to Congress a supplemental appropriation re- quest of $2.3 million to cover one-half of fiscal year 1982 pay-raise costs. This amount, together with cost-reduction actions taken as a result of the self-assessment review, will permit the Institution to continue operations with a minimum of disruption to essential ac- tivities. Revised projections for Unrestricted General Trust Funds still anticipated a break-even budget, with increased net gains ex- pected from the Smithsonian magazine being offset by lower re- turns in other auxiliary activities and increased administrative expenses. The performance of the Institution’s investment managers was reviewed by the Investment Policy Committee at its meeting on April 28, 1982. Mr. Hohenlohe noted that total Smithsonian en- dowments continued to outperform the standard market indices. The Board of Regents approved the total return income payout for fiscal year 1983 as recommended. By invitation six members of the National Board of the Smith- sonian Associates joined the meeting of the Board of Regents for the discussion of the Quadrangle. The Secretary highlighted the report circulated in advance, noting progress through the tentative design phase. Accordingly, the architect’s drawings, specifications, and construction estimate were submitted to the General Services Administration. A second estimate was also obtained by the Insti- tution. The estimates suggested that some cost savings will be re- quired to meet the $75 million budget, but these savings will not force any major alterations to the project. The Secretary added that the Smithsonian will not appeal to Congress for any amount greater than the $36.5 million requested for construction. He also noted progress in the congressional approval of the construction authorization. Mr. Ripley outlined the foreign gifts and pledges to date and [23] noted prospects for additional foreign donations. It was noted that all gifts and pledges ($13,910,800), added to Smithsonian unre- stricted fund transfer ($12,357,100), total $26,267,900—more than two-thirds of the $37.5 million goal. The Secretary underscored the importance of the National Board of the Smithsonian Associates in the domestic fund-raising cam- paign, noting that the extraordinary generosity and dedication of several members has been critical to launching a sequential strategy for soliciting leadership-level gifts, to be followed by an expanded search for more moderate gifts. A series of special regional meet- ings will be arranged for the Secretary in this connection. A broader appeal to the entire membership of the National Associates may ensue. One of America’s leading collectors of Near and Far Eastern art, Dr. Arthur M. Sackler, made a firm proposal for the donation of works of oriental art valued at $50 million and also $4 million in cash toward the construction costs of the Quadrangle, with the condition that the new gallery of Near and Far Eastern art will be named for him. After discussion, the Regents authorized the Secre- tary to negotiate terms of the agreement, subject to further review by the Board. Mr. Ripley informed the Regents that the Museum Support Cen- ter was 65 percent complete on April 22, 1982, and that procedures are being developed to facilitate a complex, multi-stage move to the center. The Secretary reported on the status of the Institution-wide collections inventory and the progress in formulating up-to-date collections management policies. It was noted that the Secretary received the rank of Commander in the Order of Orange-Nassau just prior to the visit of the Queen of The Netherlands, in recognition of the work culminating in the Queen’s opening of the De Stijl exhibition at the Hirshhorn Mu- seum and Sculpture Garden, as well as, more generally, the Smith- sonian’s work over the years. The Regents offered their approval and congratulations. The traditional Regents’ Dinner was held in honor of Mr. Webb the evening of May 2, in the “Commons” of the Smithsonian Insti- tution Building. The guests gathered in the Victorian Garden, where a model of the Quadrangle was on view. The Chancellor presented a citation to Mr. Webb dedicating the Webb Fellow- [24] Shown above is the Regents’ meeting of January 25, 1982, in progress. Below. Her Majesty, Queen Beatrix of The Netherlands and Abram Lerner, director of the Hirsh- horn Museum and Sculpture Garden, attended the official opening of De Stijl: 1917- 1931, Visions of Utopia, April 19, 1982, at the Hirshhorn. ships in his honor: “. . . the Webb Fellowships will nurture man- agement abilities of Smithsonian employees and visiting scholars for years to come—and will therefore continue to symbolize our profound gratitude for this sensitive and dear colleague.” The Sec- retary offered a toast to Dr. Fred L. Whipple, in whose name the astronomical observatory at Mt. Hopkins was to be dedicated on May 7, 1982. There followed a showing of the film In Open Air, procured through the generosity of the Allbritton Foundation in connection with the exhibition of the American Impressionists’ paintings. The Chancellor called to order the autumn meeting of the Board of Regents on Monday, September 20, 1982, in the Regents’ Room. The Executive Committee reported on their August 25 meeting, where the Committee discussed contingency plans, should a pay supplemental appropriation not be forthcoming, and called for a staff report on the projected deficit of the Division of Performing Arts to be distributed to the Audit and Review Committee. The Treasurer reported that the Institution’s banking and cash-manage- ment systems are being simplified, streamlined, and modernized. The Committee then discussed in detail the status of the Quad- rangle project and agreed to recommend proceedings as proposed (see below). The Audit and Review Committee reported on its meeting of May 21, 1982, noting that Coopers and Lybrand had found no weaknesses in accounting and controls in their audit of fiscal year 1981 federal appropriations. Mr. Jameson presented a report on the status of equal opportunity and affirmative action, emphasizing the persisting problems of underrepresentation in professional and administrative positions. The Committee received a report on the organization of book publishing at the Smithsonian. The Treasurer informed the Regents that the Institution received a federal supplemental appropriation of $2.7 million, some $400,- 000 above the Institution’s request of $2.3 million for fiscal year 1982; that Unrestricted General Trust Funds were projected to pro- vide a small surplus of $47,000, compared to an original breakeven budget; and that substantial gains by the magazine, the National Associates, and the Smithsonian Institution Press largely offset higher administrative and program expenses and a substantial deficit in the Division of Performing Arts. [26] The Treasurer added that House and Senate mark-ups of the Institution’s fiscal year 1983 appropriation request were not antici- pated until late in September, and it would appear the Institution would again be required to operate under a continuing resolution for a portion of the new fiscal year. Net income from Unrestricted General Trust Funds is expected to total $12,237,000 in fiscal year 1983, an increase of $720,000, due primarily to improved perfor- mance in certain of the auxiliary activities and holding program growth and administrative costs to a minimum. The Regents ap- proved this budget, reauthorizing the Collections Acquisition, Scholarly Studies, and Educational Outreach programs for a sec- ond five-year period at an annual level of $2.2 million, an increase of $200,000 above the previous funding level. This increase will allow some expansion for research and education outreach projects and will expand the Collections Acquisition Program to include the Cooper-Hewitt Museum. The Regents reviewed and approved for submission to the Office of Management and Budget a request for federal appropriations totaling $178,653,000 for fiscal year 1984. The Secretary added that, with the approval of the Chairman of the Executive Committee, the Institution signed a contract for the sale of the Belmont Conference Center and 82 surrounding acres to the American Chemical Society. The Regents’ Investment Policy Committee reported that the market value of the Smithsonian Endowment Funds, paralleling substantial gains in the stock market, increased from $77.4 million at the end of June to just under $85 million as of the beginning of September. Over the last four years and two months, there has been an annual compounded rate of return of 13.3 percent, some two percentage points ahead of the major market indices and well ahead of the annual inflation rate of approximately 10 percent. The Secretary reported on the completion of the intermediate working plans for the Quadrangle, noting that final plans are ex- pected to be completed by November 15. A request for bids will be issued in early January. To save about three months and approxi- mately $1.5 million in escalation costs, separate design and bid packages are being prepared for solicitation—as soon as receipt of a construction appropriation is assured—for constructing a perim- eter fence, removing existing landscape materials, and relocating utility lines. On September 14 the Commission on Fine Arts gave [27] general approval to the building plans but asked for further study of landscaping details. The National Capital Planning Commission will review the project in October. The Secretary added that, in accordance with the Regents’ earlier approval, he signed an agreement with Dr. Sackler providing for a pledge of $4 million toward construction of the Quadrangle; a donation of nearly 1,000 works of Oriental art valued at well over $50 million and selected by the director of the Freer Gallery; a provision that the director of the Freer be also the director of the western portion of the Quadrangle interconnecting with the Freer, such portion to be known as the Arthur M. Sackler Gallery; and that the director be assisted by an assistant director whose prin- cipal duty would be day-to-day management of the gallery; a mutual commitment to continue a program of scholarly publica- tion based on the collection, conducted at the donor’s expense; and an understanding that the donor’s commitments are contingent upon the Smithsonian obtaining $36.5 million in federal funds for construction costs by July 1983. Mr. Ripley stated that as of July 31, 1982, a total of $27.4 mil- lion had been raised or committed toward the fund-raising goal of $37.5 million. The sequential fund-raising technique recommended by Brakeley, John Price Jones, Inc., is being utilized, concentrating first on commitments from prospects with substantial gift potential and those with close associations with the Smithsonian. Members of the National Board of Smithsonian Associates have given or pledged $1.4 million, and that total is expected to reach $2 million. Members of that board have also assumed active roles in fund- raising among corporations, foundations, and other individuals, and have been helping to organize regional functions at which the Secretary will present the concepts and plans for the Quadrangle to local leadership. A broad general appeal will be directed to Smithsonian Associates through Smithsonian magazine in 1983. Solicitation of foreign gifts continues in the Middle East and South- east Asia and among businesses with interests in African nations. Mr. Brakeley stated that the campaign is going very well and he is confident that the required funds will be raised on schedule. The Quadrangle authorizing legislation, signed June 24, 1982, stipulated that no funds appropriated for construction shall be ob- ligated or expended until the Regents have available from non- [28] < a bP Li Fred Whipple (center), former director, sAo, was honored May 7, 1982, with the naming of the Smithsonian research facility on Mt. Hopkins, Arizona, “The Fred Lawrence Whipple Observatory.” Assistant Secretary for Science David Challinor (right) and George B. Field, current director of sao, presided over the unveiling of a commemorative plaque. Below are shown the new alligator and crocodile exhibition areas of the National Zoo’s recently renovated reptile and amphibian house. 6 Ne ee ot Al OP AP OE federal sources a sum which, when combined with the appropriated funds, is sufficient for the construction. Assuming approval of this appropriation (the House included it in the continuing resolution for fiscal year 1983), the Board of Regents needed to certify the availability of the nonfederal sources before any construction ap- priation could be obligated. Given the success of efforts to date, the strength of future prospects, and the existence of trust funds in the event insufficient funds are raised, the Regents voted to express gratitude to the Congress and the President for the authorization of the Quadrangle project and the anticipated implementing appro- priation; to affirm full confidence in the ability of the Institution to secure from nonfederal sources remaining funds to total $37.5 million towards the Quadrangle project; to pledge that unrestricted trust funds of the Institution will be directed to the project to the extent necessary to guarantee its commitment of $37.5 million of nonfederal funds; and to certify therefore that, with an appropria- tion as requested, total project funds of $75 million are available, and construction may commence. Subsequent to the meeting, the Regents’ resolution was communicated to the chairmen of the Smithsonian’s authorizing and appropriations committees in the Congress. The Secretary highlighted a report on the construction of the Museum Support Center, then more than 90 percent complete, ahead of schedule, and within budget. Favorable bids were received for supplying the storage equipment for “’wet” collections, while specifications continue to be developed for other kinds of storage equipment (to be bid in January 1983). In recognition of Mr. Warren Robbins’s service to the Smith- sonian and to the nation in founding the National Museum of African Art and overseeing its development from a small private venture to its present status, the Regents voted to award him the Henry Medal. The Regents also voted to appoint to the Commis- sion of the National Museum of African Art, effective January 1, 1983, Frank Moss, Frances Humphrey Howard, Roy Sieber, David Driskell, and Robert Nooter for a term of three years; Walter Washington, Richard Long, John Loughran, Susan Samuels, and Robert Thompson for a term of two years; and Franklin Williams, Lee Bronson, John Duncan, Michael Sonnenreich, and Sylvia Boone for a term of one year. [30] It was noted that in response to the Acting Secretary’s letter of June 15, the Regents had unanimously voted to concur in the pro- posed agreement for the purchase of Gilbert Stuart’s ‘Edgehill’ portrait of Thomas Jefferson. The Secretary added that the acquisi- tion has proceeded as outlined, and this unique portrait is now shared by the National Portrait Gallery and Monticello at a cost of $500,000 to each. Display of the portrait will alternate between the two every three years. The Secretary also reported that Julian T. Euell, Assistant Secre- tary for Public Service since 1973, will be leaving to become direc- tor of the Oakland Museum, October 1, and the Secretary added he will be reorganizing some aspects of the Public Service func- tions at that time. The traditional dinner was held on Sunday evening, Septem- ber 19, at the National Zoo in the Reptile House, following cock- tails in the Ape House. After dinner the Secretary greeted the Regents and guests and introduced the new Regent, Miss Hanks. He also paid tribute to the departing Assistant Secretary for Public Service, Julian T. Euell. He went on to honor the generous sup- porters of the Quadrangle, particularly Dr. Arthur M. Sackler, and spoke briefly about his aspirations for this significant addition to the Smithsonian’s museums. [31] SMITHSONIAN INSTITUTION OPERATING FUNDS Fiscal Years 1970, 1975, and 1980-1982 (In $1,000,000’s) 250 | v ~ a — oa a. ° 7 Oo, ou. o ro } vA Auxiliary Activities Expenses Trust Funds (Gross Revenues) FUNDS PROVIDED 200 175 150 - Federal Grants and Contracts Be 2.02.2. 6202 Soe 226 Foret, 125 100 75 Appropriations 50 ain ih A EAT ‘NIM 25 1982 1981 1975 1980 1970 To Plant and Endowment Ww co) o — 5 Me Co) Ww Ww cH) 5 —_ r= s) o jae so 7 Lv] q ° 5 ts] Me ~ ae c £ ae] 5 12) 0 =} o vu u =) Oo no} S o > q es ’® =} Shops). 555. Ae ths 1,022 631 856 —Concessions, Parking and Food Services .. 1,938 1,978 1,513 ETL oo io us 'hi6 goa tas ahaa val wae Wig i ce ct a (191) (251) (322) Perrerming Asta 2. 293.2. sce bee ele (75) (186) (2,544) Smsthooniasr Press *( -/s0. ss aeons. Be eee 557 767 670 Traveling, Exhibitions ©: 3)... 22058 0 eal eae (268) (226) (298) PGE DEEOIEES. 5s 523.05 8 op on es one $34,597 $20,987 $12,962 *Obligation authority of $19 million deferred until FY 1981 on instructions from Office of Management and Budget. Other nonappropriated fund receipts included a gift for renova- tion of the south entrance to the Smithsonian Institution Building, a settlement for damages to the American Art and Portrait Gallery building that were done during Metro subway construction, a bequest of real estate which was subsequently transferred to the endowment funds, and interest paid on unexpended fund balances. Funds also were transferred for mortgage payments on property occupied by the National Museum of African Art. [48] Taste 10. Endowment and Similar Funds September 30, 1982 Book value Market value ASSETS Pooled Consolidated Endowment Funds: TE) $ 8,919,165 $ 8,919,165 Nc GOR 50's w Wald ake <'v'w Sad pela 13,341,192 14,451,431 CS TE CeO 9 ee 814,000 900,000 Ee acess ce sne aap ree tues pan 59,806,844 64,587,546 Mee POled FANGS 2.2.85... ee tees 82,881,201 88,858,142 Nonpooled Endowment Funds: MEMES UAENO . ho Uicids os & sw cic'e's cle Se ds wee 100,020 100,020 Loan to U.S. Treasury in Perpetuity .......... 1,000,000 1,000,000 Ne he era ea ee nwt Shae oie im wm) eo 39,769 39,700 I ES ee ee, Se ee 1,999 8,100 ee an cise nw nk wane we shana san 225,000 225,000 Total Nonpooled Funds ................. 1,366,788 1,372,820 Total Endowment and Similar Fund Balances .... $84,247,989 $90,230,962 FUND BALANCES Unrestricted Purpose: True Endowment ......... $ 3,023,414 $ 3,781,557 Quasi Endowment ....... 32,742,990 33,378,487 erat Unrestricted Purpose .............. 35,766,404 37,160,044 Restricted Purpose: True Endowment .......... 36,319,845 40,129,316 Quasi Endowment ......... 12,161,740 12,941,602 Teche MeStricted PUTPOSE . . ....~s acess 48,481,585 53,070,918 Total Endowment and Similar Fund Balances .... $84,247,989 $90,230,962 Endowment and Similar Funds The market value of Smithsonian Endowment Funds was $90,231,000 on September 30, 1982, as compared to $79,025,000 on September 30, 1981. The majority of these funds—$88,858,000 —is invested in the Pooled Consolidated Endowment fund under outside investment management; $1 million is on permanent de- posit with the United States Treasury; and the remaining $373,000 is held in miscellaneous securities and donated real estate. Approxi- mately 59 percent of the endowments, as shown in Table 10, are [49] Taste 11. Market Values of Pooled Consolidated Endowment Funds (In $1,000’s) Fund 9/30/78 9/30/79 9/30/80 9/30/81 9/30/82 Unrestricted: 2 dicts. ass $18,114 $22,614 $28,384 $30,399 $35,974 Fréte (58 681 it. 16,807 18,303 20,771 20,472 22,596 Other Restricted ....... 22,109 24,639 28,175 27,101 30,288 ys ot Caine ek Sa tg $57,030 $65,556 $77,330 $77,972 $88,858 restricted, with income available only for purposes specified by the donor. The remaining 41 percent—or $37,160,000—are unre- stricted, with income available for general Institutional purposes; certain of these unrestricted funds, however, such as the Lindbergh Chair of Aerospace History, have been designated internally for specific purposes, as noted in Table 13, which lists all Smithsonian endowments. Investment management of the Pooled Consolidated Endowment fund is conducted by three professional advisory firms under the oversight of the Investment Policy Committee and the Treasurer, and subject to guidelines established by the Board of Regents. As of the end of fiscal year 1982, the firms (with their respective por- tions of the fund) were Fiduciary Trust Company of New York (50 percent), Batterymarch Financial Management Corp. (31 per- cent), and Torray Clark & Company (19 percent). The total rate of return for the fund during fiscal year 1982, as calculated by an outside investment measurement service, was +15.7 percent (in- cluding interest and dividend income as well as market value ap- preciation), as compared to +12.1 percent for the Dow Jones In- dustrial Average and +9.9 percent for the Standard & Poor’s 500 average (both calculated on the same basis). Table 11 displays the market values of the major components of the fund for prior years, and the activity during the past year is shown on Table 12. The Smithsonian utilizes the Total Return Income policy, which defines total investment return as yield (interest and dividends) plus appreciation, including both realized and unrealized capital gains. A portion of this return is made available for expenditure each [50] Tae 12. Changes in Pooled Consolidated Endowment Funds for Fiscal Year 1982 (In $1,000’s) Inter- Gifts est Market Market and and Income value Market value trans- divi- paid Sub- appre- value Fund 9/30/81 fers dends* out total ciation 9/30/82 Unrestricted ...... $30,399 $ 2,172 $ 2,083 $ 1,158 $33,496 $ 2,478 $35,974 i ee 20,472 — 1,394 907 20,959 1,637 22,596 Other Restricted .. 27,101 355 1,862 1,210 28108 2,180 30,288 ee $77,972 $ 2,527 $ 5,339 $ 3,275 $82,563 $ 6,295 $88,858 *Income earned, less managers’ fees of $367,138. year, and the remainder is retained as principal. This total return income payout is determined in advance each year by the Board of Regents based on studies of anticipated interest and dividend yields, the Institution’s programmatic needs, inflationary factors, and the five-year running average of market values, adjusted for capital additions or withdrawals. The income payout rate for fiscal year 1982 to restricted purpose endowments in the Pooled Consoli- dated Endowment fund constituted an 8 percent increase over the prior year, while the payout to unrestricted endowments was re- duced from the earlier level, permitting a proportionately greater reinvestment for unrestricted endowments. After the income payout of $3,275,000 during the year, a total of $2,064,000 of excess inter- est and dividend yield was reinvested into endowment principal. A full listing of all endowment funds is shown on Table 13. De- tail of the securities held in the Pooled Consolidated Endowment fund as of September 30, 1982, may be obtained upon request from the Treasurer of the Institution. [51] Taste 13. Endowment Funds September 30, 1982 Principal Book Market Funds value value UNRESTRICTED PURPOSE—TRUE: Avery) FUnGs mucmcs usivemeaivecines dams vis ecerie et $ 97,414 $ 125,194 Higbee, Hatry,’ Memorials soos c is sccn tes wens 27,592 35,435 Hodgicins Fred 16s. ci nee ale ais cna ein oracle ceere nies 194,654 87,394 Morrow, , DWwishtayin ss. cancses socmdaeon ences 163,348 333,971 Mussinan » Aired) (a -as ss aa ncaies'am scien alcieteiteton 53,367 63,744 QImsted, Helen WA a.cesnedeccsees se eh Pee 1,736 2,224 Poore, Lucy i. jand ‘George Wek Om fo Operating funds Construction funds Capital funds Total federal fund balances Total all fund balances Ss ww eee se. ae es Total liabilities, undelivered orders and fund balances Trust funds $ 2,632 407 109,551 21,751 9,902 1,518 8,771 18,430 $173,593 $ 17,944 2,265 831 20,061 41,101 5,048 13,003 5,906 84,248 24,287 132,492 132,492 Federal funds $ 46 $ 2,678 $ 38,080 51 6,441 1,135 6,163 179,617 $231,533 Cy dy fol 202 5,657 180,752 186,611 186,611 Totals, all funds 38,487 109,551 21,802 7,072 9,902 2,653 6,163 8,771 198,047 Totals, 1981 900 32,473 103,234 20,321 22,460 7 A462 2,224 5,847 6,329 177,633 $405,126 $378,883 $ 25,739 2,300 6,994 20,061 55,094 30,929 5,048 13,003 5,906 84,248 24,287 132,492 202 5,657 180,752 186,611 319,103 $173,593 $231,533 $405,126 The accompanying notes are an integral part of the financial statements. $ 21,137 1,993 6,627 16,713 46,470 39,458 5,043 12,599 5,951 75,458 21,312 120,363 379 9,007 163,206 172,592 292,955 $378,883 SMITHSONIAN INSTITUTION Statement of Financial Activity Year ended September 30, 1982 with comparative totals for the year ended September 30, 1981 (thousands of dollars) TRUST FUNDS Endow- Total ment and trust Current — similar Plant funds funds funds funds Revenue and other additions: Appropriations soot ee, $ — $ — $ — $ — Auxiliary activities revenue ................. 95,593 95,593 _ = Federal grants and contracts. .............<:. 13,217 13,217 ba — Investment income (net of $367,000 for management and custodian fees) .......... 9,635 8,586 — 1,049 Net gain on sale of securities ............... 3,884 4 3,880 — Gifts, bequests and foundation grants ....... 6,205 5,234 44 927 Additions to plant (Note 9) ................. 1,871 os — 1,871 Rentals, fees, commissions and other ........ 2,372 2,194 —— 178 Total revenue and other additions ....... _ 132,777 124,828 3,924 4,025 Expenditures and other deductions: Research and educational expenditures ....... 23,521 2a:52% — — Administrative expenditures ................-. 8,810 8,810 — — Facilities services expenditures .............. 1,275 1,275 — — Auxiliary activities expenditures ............. 85,153 85,153 — — Expenditures for acquisition of plant (Matern 28-v ic rR ari oe a el 1,865 mel —! eae Property use and retirements (Note 9) ....... — — — a Retirement of indebtedness ................. 6 — — 6 Interest (on iIndebletness .); 6.5 oe a 18 — — 18 Endowment reimbursement (Note 6) ......... — — — —= Total expenditures and other deductions . 120,648 118,759 — 1,889 Excess of revenue and other additions over (under) expenditures and other deductions (Note 11) ........ 12,129 6,069 3,924 2,136 Transfers to government agencies ............. == —= — = Transfers among funds—additions (deductions): Mandatory principal and interest on notes .... aa (24) se 24 Nonmandatory for designated purposes, net (Note 32). 2 S285 AURaes. eo eee cas — (5,681) 4,866 815 Total transfers among funds ............ — (5,705) 4,866 839 Net increase (decrease) for the year ..... 12,129 364 8,790 2,975 Returned: fo. U.S; eens ici idlo wim aha annie — — —_ a Fund balances at beginning of year ........... 120,363 23,593 75,458 21,312 Fund balances at end of year ..60csesceccesans $132,492 $ 23,957 $84,248 $24,287 The accompanying notes are an integral part of the financial statements. FEDERAL FUNDS Total Operat- Construc- federal ing tion Capital Totals, Totals, funds funds funds funds _ all funds 1981 $145,234 $135,490 $9,744 §$ — $145,234 $141,957 _— — — _— 95,593 87,052 _— — — —_ 13,217 14,172 — — _— _ 9,635 8,156 _ — — _ 3,884 8,053 — _ _— _— 6,205 6,477 31,025 _— _— 31,025 32,896 24,921 122 122 — —_ 2,494 2,649 87,940 87,940 — — 111,461 104,449 9,661 9,661 — — 18,471 17,116 38,063 38,063 — — 39,338 36,510 — _ — —_ 85,153 72,709 13,094 oe 43,004 — 14,959 8,513 13,479 = — 13,479 13,479 15,097 — = 4s — 6 6 — — ies eee 18 18 = _ -_ eis _— 976 eee 14,144 (52) (3,350) 17,546 26,273 38,043 = sate ns ae — (5,355) 14,144 (52) (3,350) 17,546 26,273 32,688 (125) (125) = —_ (125) (64) 172,592 379 9,007 163,206 292,955 260,331 eee Cee er Oe eee eee eee eee eee eee eee eee SMITHSONIAN INSTITUTION Notes to Financial Statements 1. Summary of significant accounting policies Basis of Presentation. These financial statements do not include the accounts of the National Gallery of Art, the John F. Kennedy Center for the Perform- ing Arts or the Woodrow Wilson International Center for Scholars, which were established by Congress within the Smithsonian Institution (Institution) but are administered under separate boards of trustees. (See Note 2.) The accounts of the federal funds have been prepared on the obligation basis of accounting, which basis is in accordance with accounting principles pre- scribed by the Comptroller General of the United States as set forth in the Policy and Procedures Manual for Guidance of Federal Agencies. The obliga- tion basis of accounting differs in some respects from generally accepted accounting principles. Under this basis of accounting, commitments, such as purchase orders and contracts, are recognized as expenditures, and the related obligations are reported on the balance sheet even though goods and services have not been received. Such commitments aggregate $30,929,000 at Sep- tember 30, 1982. The trust funds reflect the receipt and expenditure of funds obtained from private sources, from federal grants and contracts and from certain business activities related to the operations of the Institution. The federal funds reflect the receipt and expenditures of funds obtained from Congressional appro- priations. Fund accounting. To ensure observance of limitations and restrictions placed on the use of resources available to the Institution, the accounts of the Institution are maintained in accordance with the principles of fund account- ing. This is the procedure by which resources for various purposes are classi- fied for funds control, accounting and reporting purposes into funds estab- lished according to their appropriation, nature and purposes. Separate ac- counts are maintained for each fund; however, in the accompanying finan- cial statements, funds that have similar characteristics have been combined into fund groups. Accordingly, all financial transactions have been recorded and reported by fund group. The assets, liabilities and fund balances of the Institution are reported in self-balancing fund groups as follows: Trust current funds, which include unrestricted resources, represent the portion of expendable funds that is available for support of Institution operations. Amounts restricted by the donor for specific purposes are segregated from other current funds. [60] Trust endowment and similar funds include funds that are subject to restrictions of gift instruments requiring in perpetuity that the princi- pal be invested and the income only be used. Also classified as endow- ment and similar funds are gifts which allow the expenditure of princi- pal but only under certain specified conditions and quasi-endowment funds. Quasi-endowment funds are funds established by the governing board for the same purposes as endowment funds; however, any portion of such funds may be expended. Restricted quasi-endowment funds rep- resent gifts for restricted purposes where there is no stipulation that the principal be maintained in perpetuity or for a period of time, but the governing board has elected to invest the principal and expend only the income for the purpose stipulated by the donor. Trust plant funds represent resources restricted for future plant acquisi- tions and funds expended for plant. Federal operating funds represent the portion of expendable funds that is available for support of Institution operations. Separate subfund groups are maintained for each appropriation—Salaries and Expenses appropria- tions, Special Foreign Currency appropriations, and Barro Colorado Island Trust Fund. The balance of this fund represents amounts available for support of specific Institution operations including the Special Foreign Currency Program, Franklin Delano Roosevelt Appropriations, and Barro Colorado Island Trust Fund. Federal construction funds represent the portion of expendable funds that is available for building and facility construction, restoration, reno- vation and repair. Separate subfund groups are maintained for each ap- propriation—Construction and Improvements, National Zoological Park, Restoration and Renovation of Buildings and Museum Support Center. Federal capital funds represent the amount of the investment of the United States Government in the net assets of the Institution acquired with federal funds and nonexpendable property transfers from Govern- ment agencies. Investments. All gains and losses arising from the sale, collection or other disposition of investments are accounted for in the fund in which the related assets are recorded. Income from investments is accounted for in a similar manner, except for income derived from investments of endowment and simi- lar funds, which is accounted for in the fund to which it is restricted or, if unrestricted, as revenue in unrestricted current funds. Merchandise inventory. Inventories are carried at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method, or retail cost method (for those inventories held for resale). Materials and supplies inventory. Inventories of materials and supplies are carried at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method. Deferred revenue and expense. Revenue from subscriptions to Smithsonian Magazine is recorded as income over the period of the related subscription, [61] which is one year. Costs related to obtaining subscriptions to Smithsonian Magazine are charged against income over the period of the subscription. The Institution recognizes revenue and charges expenses of other auxiliary activities during the period in which the activity is conducted. Works of art, living or other specimens. The Institution acquires its collec- tions, which include works of art, library books, photographic archives, ob- jects and specimens, through purchase or by donation of the items them- selves. In accordance with policies generally followed by museums, no value is assigned to the collections on the statement of financial condition. Pur- chases for the collections are expensed currently. Property and equipment. Capital improvements and equipment purchased with trust funds and utilized in income-producing activities are capitalized at cost and are depreciated on a straight-line basis over their estimated useful lives of three to ten years. All other capital improvements and equipment purchased with trust funds are expensed currently. Real estate (land and buildings) purchased with trust funds is recorded at cost, to the extent that restricted or unrestricted funds were expended there- for, or appraised value at date of gift, except for gifts of certain islands in the Chesapeake Bay and the Carnegie Mansion, which have been recorded at nominal values. Depreciation on buildings purchased with trust funds is not recorded. Buildings and other structures, additions to buildings and fixed equipment purchased with federal funds are recorded at cost and depreciated on a straight-line basis over a period of 30 years. Certain lands occupied by the Smithsonian Institution’s buildings were ap- propriated and reserved by the Congress for that purpose and are not re- flected in the accompanying financial statements. Property and nonexpendable equipment acquired through transfer from Government agencies are capi- talized at the transfer price or at estimated amounts taking into consideration their usefulness, condition and market value. Nonexpendable equipment pur- chased with federal funds is recorded at cost depreciated on a straight-line basis over a period of 10 years. Government contracts. The Institution has a number of contracts with the U.S. Government, which primarily provide for cost reimbursement to the Institution. Contract revenue is recognized when billable or received in the trust funds. Contributed services. A substantial number of unpaid volunteers have made significant contributions of their time in the furtherance of the Institution’s programs. The value of this contributed time is not reflected in these state- ments since it is not susceptible to objective measurement or valuation. Annual leave unfunded. The Institution’s civil service employees earn annual leave in accordance with federal law and regulations. However, only the cost of leave taken as salaries is funded and recorded as an expense. The cost of unused annual leave at year-end is reflected in the accompanying financial statements as an asset and accrued liability in the federal funds. [62] 2. Related activities The Institution provides fiscal and administrative services to several sepa- rately incorporated organizations in which certain officials of the Institution serve on the governing boards. The amounts paid to the Institution by these organizations for the aforementioned services, together with rent for Institu- tion facilities occupied, etc. totaled approximately $323,000 for the year ended September 30, 1982. The following summarizes the approximate ex- penditures of these organizations for the fiscal year ended September 30, 1982 as reflected in their individual financial statements and which are not included in the accompanying financial statements of the Institution: ($000s) Smithsonian Science Information Exchange ..............2-0e000- $1,900 MMU AINETICAL UIC, wisn aic'v msi ie e's wee veer daeee vielen ecas $7,500 Woodrow Wilson International Center for Scholars—trust funds ... $3,000 Woodrow Wilson International Center for Scholars— MEMEMISEENCAONNS «1550550. 5 ch coak «x Wie igua'n dbs eyo af x3 eA. 08 Su ayn .a, ow wo bs $1,897 The Smithsonian Science Information Exchange ceased operations as of October 31, 1981. The U.S. Department of Commerce provided a grant to close down operations and to perfect an orderly liquidation, which is con- tinuing with final close-out projected in fiscal year 1983. 3. Cash on hand—federal funds This represents deposits in transit and the amount of imprest fund cash advanced by the U.S. Treasury to imprest fund cashiers for small purchasing purposes. 4. Fund balance with U.S. Treasury The account represents fund balances on the books of the U.S. Treasury available for disbursement. 5. Investments Investments are recorded at cost, if purchased, or fair market value at date of acquisition, if acquired by gift. At September 30, 1982, investments are composed of the following: Carrying Market value value ($000s) ($000s) Current funds: DEMS GEICDOSIE (onc. ic encase ewe ve sme ene $ 11,977 $ 11,977 MTP FIN 8.5.5 5. shas's ais nisayod peat Sh prt tniewin x, ons © hes 1,974 1,974 U.S. Government and quasi-Government obligations .. 12,330 12,515 ee ee 145 138 I Nea hehe aw pian Mew Wine e sid wm 56 48 26,482 26,652 [63] Endowment and similar funds: Money markel GCCOUNES oo 3 55ciniian ccna ee aa ate 8,066 8,066 boar i0 (ioe. LYCAGOrY . .. caccaa gs cock Cea ma Osa 1,000 1,000 U.S. Government and quasi-Government obligations .. 10,711 11,641 Corporate” BOtitie! fee. soy ae et at eer tae ea ee ea eee 3,484 3,750 Connon stocks 3.5 sia As Se oe es ee bee eee 59,256 64,130 Preferred stock. 3235 33 ee a Ae ee Rees 552 465 83,069 89,052 $109,551 $115,704 Substantially all the investments of the endowment and similar funds are pooled on a market value basis (consolidated fund) with each individual fund subscribing to or disposing of units on the basis of the value per unit at market value at the beginning of the month within which the transaction takes place. Of the total units, each having a market value of $148.04, 290,802 units were owned by endowment, and 309,427 units were owned by quasi-endowment at September 30, 1982. The following tabulation summarizes changes in relationships between cost and market values of the pooled investments: Market ($000s) value Net per Market Cost change unit Eggeat Yeah 0, aude wut eee eee $88,858 $82,881 $5,977 $148.04 Besmmine Of Year Sorc souv ese e cee $77,972 $74,411 3,561 134.12 Increase in unrealized net gain FOr fhe YEAR isda xd .ajeino dae. # asides '< atanie Sear a 2,416 Realized net gain for the year) 23.5.0 4. vine cles omg 3,880 Total realized and unrealized net gain. for the year. scan: als teed soe eee $6,296 $ 13.92 6. Endowment and similar funds Endowment and similar funds at September 30, 1982 are summarized as follows: ($000s) Endowment funds, income available for: Restricted PULPOSeS. oe vi es > ol 3,023 39,343 Quasi-endowment funds, principal and income available for: Restricted” purposes fo. a.vesscnccresases snes new te ta 12,162 Unrestricted purposes <1. ...2 05.255 -50052 > eb ee sees a 32,743 44,905 Total-endowment and similar funds |. .2...... 21.0) eee $84,248 [64] The Institution utilizes the “total return” approach to investment manage- ment of endowment funds and quasi-endowment funds. Under this approach, the total investment return is considered to include realized and unrealized gains and losses in addition to interest and dividends. An amount equal to the difference between interest and dividends earned during the year and the amount computed under the total return formula is transferred to or from the current funds. In applying this approach, it is the Institution’s policy to provide, as being available for current expenditures, an amount taking into consideration such factors as, but not limited to: (1) 41/2°/o of the five-year average of the mar- ket value of each fund (adjusted for gifts and transfers during this period), (2) current dividends and interest yield, (3) support needs for bureaus and scientists and (4) inflationary factors as measured by the Consumer Price Index; however, where the market value of the assets of any endowment fund is less than 110°/o of the historic dollar value (value of gifts at date of donation), the amount provided is limited to only interest and dividends received. The total return factor for 1982 was $5.94 per unit to the Restricted and Designated Purpose Endowment Funds and $5.00 per unit to the Unre- stricted General Purpose Endowment Funds; new units were purchased for the Unrestricted Endowment Funds with the $.94, the difference in the total return factor. The total return applied for 1982 was $2,230,000 to the Re- stricted and Designated Purpose Endowment Funds and $1,046,000 to the Unrestricted General Purpose Endowment Funds. Endowment reimbursement represents payment of income, which had accu- mulated in principal of the endowment funds, in accordance with a settle- ment related to a lawsuit. 7. Receivables Receivables at September 30, 1982 included the following: Trust funds ($000s) Accounts receivable, auxiliary activities; net of allowance for coup) accounts of $962,000 in 1982 ...........cscccceces $ 9,148 Interfund receivables due from current funds: SEE AMG SUMUAT LUNGS occ eos a dnc hace ewcncsarecncenens 812 oS Ae gs dda as Phd 8s OK cub RNa em WS gow Sok 8,615 enOeE At GAWIGENGS TECEIVADIE 2.0.05. ceca ccccccvecaseadsnaues 2,181 Unbilled costs and fees from grants and contracts ............... 892 a oe aie w Grd uke hana We dros Sais Ga aca. a.ed ® Mie wd ame 103 “L793 Federal funds AE a. orn. wo ssie ape dptikie Ain i ase wis nh ene nn ae ne Ae Bn 51 SE MMU ARCIR RIOD. Cahiers ah. Sy Wk SUR ad: Sete lels, id «luverion oe WS aretha d $21,802 8. Advance payments Advance payments represent advances made to Government agencies, educa- tional institutions, firms and individuals for services to be rendered or prop- erty or materials to be furnished. [65] As of September 30, 1982, the Institution has advances outstanding to the U.S. Government of approximately $4,084,000, principally for construction services to be received in the future. The Institution at that date also had advances outstanding to educational institutions amounting to approximately $2,150,000, principally under the Special Foreign Currency Program. 9. Property and equipment At September 30, 1982, property and equipment which has been capitalized (see Note 1) is comprised of the following: Current funds (¢$000s) Ganital improvements: <. c.scie> 626 = bigs crenciins eee | $ 1,949 BGQHDMehhs ian } weds une aay SA ae = epiomeTe 2,146 Leasehold: improvements) > oc. Sai. aaiteas fo eecas, aon ee 247 Less accumulated depreciation and amortization ...... 2,026 2,316 Endowment and similar funds Land: ‘anw’ buildings Q.7 1.5) Sn oes Seer ace 225 Plant funds Larid! “and ‘bunldings asc «, . cisteee saule ae cota Fie opines nea 15,889 Total steust funds eceual. beecwik eeRe $ 18,430 Capital funds PROPOR ie) ia siti ti toad Sy acta oe eae et cae a 236,621 EGQRePOG RE a ioc is sc ietenn udtous mace ousdatan ieee sya iece heen = aah ote 26,991 Eess: accumulated: depreciation) <:s..0 <6 .00s so se eee 83,995 179,617 $198,047 Depreciation and amortization expense reflected in expenditures of the cur- rent funds for 1982 was $495,000. Depreciation expense reflected in expendi- tures of the capital funds of 1982 was $9,619,000. The balance of the plant fund at September 30, 1982 includes $8,568,000 of unexpended plant funds. 10. Pension plan The Institution has separate retirement plans for trust and federal employees. Under the trust fund’s plan, both the Institution and employees contribute stipulated percentages of salary which are used to purchase individual annui- ties, the rights to which are immediately vested with the employees. The cost of the plan for the year ended September 30, 1982 was $2,771,000. It is the policy of the Institution to fund plan costs accrued currently. There are no unfunded prior service costs under the plan. The federal employees of the Institution are covered by the Civil Service Retirement Program. Under this program, the Institution withholds from the gross pay of each federal employee and remits to the Civil Service Retire- ment and Disability Fund (Fund) the amounts specified by such program. [66] The Institution contributes 7°/o of basic annual salary to the Fund. The cost of the plan for the year ended September 30, 1982 was approximately $5,200,000. 11. Excess of expenditures and other deductions The net excess of expenditures and other deductions over revenue and other additions disclosed for federal operating and construction funds in the State- ment of Activity for the year ended September 30, 1982 arise because certain multiyear appropriations, having been recorded as income in prior years and carried forward as fund balance, were expended during the year. 12. Nonmandatory transfers for designated purposes The following transfers among trust funds were made for the year ended September 30, 1982 in thousands of dollars: Endow- Current funds ment and Unre- Re- similar Plant stricted stricted funds funds Portion of investment yield appropriated (Note 5) ............. $ (925) $(1,139) $2,064 $ — Purchase of property and equipment er (83) — — 83 Future plant acquisitions ............ (917) — — 917 Income added to endowment principal — (118) 118 -= Appropriated as quasi-endowment ... (2,259) (200) 2,684 (225) Other designated purposes .......... (281) 241 — 40 a $(4,465) $(1,216) $4,866 $ 815 13. Income taxes The Institution is exempt from income taxation under the provisions of Sec- tion 501(c)(3) of the Internal Revenue Code. Organizations described in that section are taxable only on their unrelated business income. The Internal Revenue Service has issued a Technical Advice Memorandum to the Institu- tion indicating that income derived from sales of certain items in the Museum Shops may constitute unrelated business taxable income. The application of this memorandum is under discussion with the Internal Revenue Service. It is the opinion of the Institution that it is also exempt from taxation as an instrumentality of the United States as defined in Section 501(c)(1) of the Code. Organizations described in that section are exempt from all income taxation. The Institution has not as yet formally sought such dual status but intends to do so in the near future. Management believes that any income taxes required as a result of settlement of these matters would not have a material effect upon the financial position of the Institution. [67] imal 4 dates ha * io! TAL nell # { Ladd, bet ees ees Lett ral | 7 : Pa att . AG K's ee | j . ae” P|